[Federal Register Volume 63, Number 129 (Tuesday, July 7, 1998)]
[Rules and Regulations]
[Pages 36555-36560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17929]


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FEDERAL TRADE COMMISSION

16 CFR Part 304


Regulatory Review and Regulatory Flexibility Act Review of Rules 
and Regulations Issued Under the Hobby Protection Act

AGENCY: Federal Trade Commission.

ACTION: Confirmation of rule.

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SUMMARY: The Federal Trade Commission (FTC or Commission) has completed 
its regulatory review and Regulatory Flexibility Act (RFA) review of 
the Rules and Regulations Issued Under the Hobby Protection Act. The 
Rule regulates the marking of imitation political and numismatic items. 
Pursuant to its regulatory review, the Commission concludes that the 
Rule continues to be valuable both to consumers and firms. The 
Commission also certifies, pursuant to the RFA, that the Rule has not 
had a significant economic impact upon a substantial number of small or 
other entities or otherwise merits revision.

DATES: This action is effective as of July 7, 1998.

FOR FURTHER INFORMATION CONTACT:
Robert E. Easton, Special Assistant, Division of Enforcement, Bureau of 
Consumer Protection, FTC, Washington, DC 20580, (202) 326-3029.

SUPPLEMENTARY INFORMATION:

I. Introduction

    The Commission has determined, as part of its oversight 
responsibilities, to review its rules and guides periodically to seek 
information about their costs and benefits and their regulatory and 
economic impact. The information obtained assists the Commission in 
identifying rules and guides that warrant modification or rescission. 
Where appropriate, the Commission will, as it did in this review, 
combine such periodic general reviews with reviews seeking information 
about the economic impact of the rule on small business firms as 
required by the Regulatory Flexibility Act.

II. Background

    On November 29, 1973, Congress passed the Hobby Protection Act 
(Act).\1\ The Act requires manufacturers and importers of ``imitation 
political items'' \2\ to mark ``plainly and permanently'' such items 
with the

[[Page 36556]]

``calendar year'' such items were manufactured. The Act also requires 
manufacturers and importers of ``imitation numismatic items'' \3\ to 
mark ``plainly and permanently'' such items with the word ``copy.'' \4\ 
The Act further provides that the Commission is to promulgate 
regulations for determining the ``manner and form'' imitation political 
items and imitation numismatic items are to be permanently marked with 
the calendar year of manufacture or the word ``copy.'' \5\
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    \1\ 15 U.S.C. 2101-2106.
    \2\ An imitation political item is ``an item which purports to 
be, but in fact is not, an original political item, or which is a 
reproduction, copy, or counterfeit of an original political item.'' 
15 U.S.C. 2106(2).
    \3\ An imitation numismatic item is ``an item which purports to 
be, but in fact is not, an original numismatic item or which is a 
reproduction, copy, or counterfeit of an original numismatic item.'' 
15 U.S.C. 2106(4).
    \4\ 15 U.S.C. 2101(b).
    \5\ 15 U.S.C. 2101(c).
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    In response to that requirement, in 1975 the Commission issued 
Rules and Regulations under the Hobby Protection Act (Rule).\6\ The 
Rule tracks the definitions of terms used in the Act and implements the 
Act's ``plain and permanent'' marking requirements by establishing the 
sizes and dimensions of the letters and numerals to be used, the 
location of the marking on the item, and how to mark incusable (i.e., 
those that can be impressed with a stamp) and nonincusable items. The 
Commission amended the Rule in 1988 to provide additional guidance on 
the minimum size of letters for the word ``copy'' as a proportion of 
the diameter of coin reproductions.\7\
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    \6\ 16 CFR Part 304.
    \7\ 53 FR 38942 (1988). Prior to the amendment, if a coin were 
too small to comply with the minimum letter size requirements, the 
manufacturer or importer had to individually request from the 
Commission a variance from those requirements. Because imitation 
miniature coins were becoming more common, the Commission determined 
that it was in the public interest to allow the placing of the word 
``copy'' on miniature imitation coins in sizes that could be reduced 
proportionately with the size of the item.
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    As discussed below, the comments received in this review appear to 
reflect a high level of compliance as to the two products covered by 
the Act and Rule (i.e., imitation political and numismatic items). Many 
comments also proposed that the Commission expand coverage of the Act 
and Rule to address problems involving the selling (passing off) as 
originals of reproductions of antiques and collectibles not covered by 
the Act and Rule. The Commission does not propose amending the Rule as 
requested because it does not have authority under the Act to expand 
coverage of the Act or Rule. In addition, existing laws and 
informational material currently available address many of the concerns 
raised by these comments.

III. Regulatory Review and Regulatory Flexibility Questions and 
Comments

    The Commission received a total of 1,145 comments in response to 
its March 25, 1997 Federal Register request for comments.\8\ Of that 
number, nearly 1,000 comments were form letters that advocated 
expanding coverage of the Act and Rules to all antiques and 
collectibles.\9\ Of the other comments, four were from national 
associations,\10\ four from hobby newspapers,\11\ one from a private 
mint,\12\ one from the United States Mint,\13\ and the remaining were 
from individual collectors,\14\ dealers,\15\ and local 
associations.\16\
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    \8\ 62 FR 14049 (1997). The comments have been filed on the 
Commission's public record as Document Nos. B21938200001, 
B21938200002, etc. The comments are cited in this notice by the name 
of the commenter, a shortened version of the comment number, and the 
relevant page(s) of the comment, e.g., Daugherty, 493, 1. All Rule 
review comments are on the public record and are available for 
public inspection in the Public Reference Room, Room 130, Federal 
Trade Commission, 6th and Pennsylvania Ave., NW, Washington, DC, 
from 8:30 a.m. to 5:00 p.m., Monday through Friday, except federal 
holidays.
    \9\ Seven hundred twenty-one comments were form letters cut out 
or photo-copied from an Antique Week newspaper or based thereon 
(e.g., Lubitz, 61, 1), 223 were form letters from collectors and 
dealers of Nippon porcelain (e.g., Dersheimer, 59, 1), and 34 
comments used or were based upon an Antiques Journal form letter 
(e.g., Mercier, 4, 1).
    \10\ American Numismatic Association (ANA), 94; American 
Political Items Collectors (APIC), 515; Antique & Collectibles 
Dealers Association, Inc., 495; and Appraisers Association of 
America, Inc., 494 and 526.
    \11\ Antique & Collectors Reproduction News, 497; Antique Week, 
499 and 540; Antiques Journal, 4; and Coin World, 514.
    \12\ Gallery Mint Museum (Gallery Mint), 398.
    \13\ U.S. Mint, 511.
    \14\ See, e.g., Barrie, 19.
    \15\ See, e.g., Dilinger, 103.
    \16\ See, e.g., Wayne County (PA) Antique Dealers Assoc., 517.
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    The Commission discusses the comments in two section: In section A, 
the Commission analyzes the comments relating to the products covered 
by the Act and Rule (``covered products''); and, in section B, the 
Commission discusses the comments relating to alleged problems with 
products outside the coverage of the Act and Rule.

A. Comments Relating to Covered Products

1. Support for the Rule
    As noted previously, the Act and Rule's scope are limited to 
imitation political and numismatic items. The comments uniformly stated 
that there is a continuing need for the Rule and that is has been 
successful in protecting consumers from the passing off of 
reproductions of the covered items.\17\ Indeed, two comments indicated 
that the Rule's protective value may have increased over the years as 
technological changes that have made it easier to make high quality 
reproductions of political and numismatic items have also made it 
easier to deceive consumers.\18\
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    \17\ See, e.g., APIC, 7, 1; Mint, 511, 1; Prestwood, 512, 1; and 
Peeling, 254, 1. For example, APIC stated that, ``We still have some 
reproductions today, but the problem is not serious, thanks to the 
Hobby Protection Act, and enforcement of the Act. Further, most 
campaign items reproduced since the early 1970's are in compliance 
with the Act, marked in accordance with the regulations.'' APIC, 7, 
1. The United States Mint similarly favored continued coverage of 
imitation numismatic items because, ``[t]he numismatic area is prone 
to opportunism, and sanctions for objectionable behavior are hard to 
impose. The Hobby Protection Act works as a preventive to counter 
attempts to pass off reproductions as genuine coins.'' Mint, 511, 1. 
Other comments similarly agree that the current Act protects the 
political memorabilia and numismatic collecting areas and should be 
continued. See, e.g., Lubitz, 61, 1.
    \18\ APIC pointed out that the advent of color copying machines, 
color computer technology, and digital image creation and 
enhancement has increased the capability of individuals to ``create, 
maintain, use, transfer, and reproduce high quality images.'' APIC, 
515, 7. ANA stated that, ``[a]ny change in relevant technology would 
only increase the ability to manufacture more deceiving replicas.'' 
ANA, 94, 3.
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    The few comments addressing the issue of what costs the Rule 
imposes on purchasers indicated that the costs are slight and 
outweighed by the benefits. For example, one commenter wrote that, 
``[a]ssuming that the costs of affixing the word `copy' or the date is 
reflected in the selling price, it would appear that the increase per 
item would be an insignificant amount that any purchaser would be 
willing to pay by reason of the protection afforded by the rule.'' \19\ 
Another commenter stated that the process of stamping the word ``copy'' 
on coins ``has no significant bearing on the price of any individual 
piece.'' \20\ One commenter noted that the Rule saves purchasers money 
because it lessens that chance of purchasing a fake.\21\
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    \19\ ANA, 94, 2.
    \20\ Gallery Mint, 398, 2.
    \21\ APIC, 515, 3.
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    In addition, the comments indicated that the Rule does not impose 
significant burdens or costs on firms subject to its requirements. The 
comments addressing this issue uniformly stated that the Rule has not 
imposed significant costs on subject firms \22\ and in fact has 
benefitted them. \23\ No comment suggested any changes in the Rule to 
reduce costs. \24\
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    \22\ See e.g., APIC: ``The costs imposed, if any, have been de 
minimis. The cost of adding a few more letters to a printing job * * 
* when the job is going to be undertaken regardless is negligible.'' 
APIC, 515 6. See also ANA, 94, 2; Coin World, 514, 3; and Gallery 
Mint, 398, 3.
    \23\ APIC, 515 6; and ANA, 94, 2.
    \24\ A few comments noted that the Rule technically overlaps 
with certain federal counterfeiting laws (Gallery Mint, 398, 3; and 
Ganz, 1, 1) and a consumer protection law in California (APIC, 515, 
6). These comments, however, did not state that the Rule conflicted 
with these laws or that overlaps caused additional costs or burdens 
to small entities or other companies, or in any other way adversely 
affected businesses or consumers. The Commission, therefore, 
concludes that these minor overlaps do not warrant modification of 
the Rule.

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[[Page 36557]]

    Commenters that addressed the issue of whether the Rule imposes 
significant costs on small businesses indicated that the Rule imposes 
only de minimis costs on small firms \25\ and several commenters stated 
there is no difference in the cost of compliance for small or large 
firms, \26\ and that these costs are no different than a small business 
would incur under standard and prudent business practices. \27\ For 
this reason, no commenters believed changes to the Rule were needed to 
reduce small business costs. \28\
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    \25\ The Gallery Mint commented that while compliance with the 
Rule involves more time in production or die set-up, this is ``just 
the nature of the business'' and the requirements are ``very easy to 
adhere to.'' Gallery Mint, 398, 4. See also APIC, 515, 7; and Coin 
World, 514, 3.
    \26\ See, e.g., ANA: ``The cost of affixing the word `copy' or 
the date would be the same for large and small firms.'' ANA, 94, 3.
    \27\ Coin World, 514, 3, and APIC, 515, 8.
    \28\ See. e.g., APIC. 515, 8; ANA, 94, 3; and Coin World, 514, 
3.
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    Some comments indicated that the Rule is valuable to manufacturers 
and firms. One commenter stated that, ``The rules * * * have benefitted 
firms which intend to be good players. The rules have provided a 
standard means of denoting lawful status as a `copy' which in turn has 
been recognized and accepted in the hobby and consumer 
marketplace.''\29\ Similarly, another commenter noted the addition of 
the word ``copy'' or the date of manufacture may avoid litigation costs 
resulting from the intentional or unintentional sale of unmarked items 
as originals.\30\
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    \29\ See. e.g., APIC, 515, 6.
    \30\ ANA, 94, 2.
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2. Proposed amendments regarding covered products
    a. Double-sided marking of ``copy'' on numismatic items.
    One comment suggested amending the Rule to require that the word 
``copy'' be marked on both sides of imitation numismatic items.\31\ The 
Rule currently requires that the word ``copy'' be marked on either side 
of the coin (i.e., either the obverse or the reverse side of the 
item).\32\ The comment argued that marking ``copy'' on only one side 
does not let potential buyers know that a replica on exhibit with only 
one side displayed or in an advertisement is an imitation because 
``copy'' may be on the side not displayed.
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    \31\ Coin World, 514, 3.
    \32\ 16 CFR 304.6(b)(2).
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    The Commission has concluded that a requirement that ``copy'' be 
marked on both sides of an imitation coin is not warranted. The 
comments indicate that the current requirement for marking coins on 
only one side is highly successful. Regarding exhibited coins, the 
potential buyer would normally have the opportunity to fully view and 
physically handle the item, thus affording the opportunity to see the 
``copy'' marking prior to purchase.
    Regarding the concern that the word ``copy'' may not be displayed 
in advertising,\33\ the Commission believes that coin depictions in 
advertising are likely to be small, making any ``copy'' marking 
proportionately even smaller. Double-sided marking of a coin is 
therefore unlikely to result in a prominent disclosure of the word 
``copy,'' and thus would not remedy the alleged problem raised in the 
comment.
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    \33\ The Act and Rule do not have requirements that address the 
advertising of covered products. The requirements address only the 
marking of the imitation numismatic or political item. Of course, 
misrepresenting a copy as an original in advertising would 
constitute a ``deceptive'' practice in violation of Sec. 5 of the 
FTC Act. 15 U.S.C. 45.
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    The Commission also believes that double-sided marking would not be 
without costs. Although the costs of marking ``copy'' on an additional 
side of the item might be slight, there would still be some cost to 
manufacturers. In addition, double-sided marking might detract from the 
esthetic appeal of the replica and could have adverse effects on the 
market for imitation numismatic items.
    b. Require that all political items be marked with year of 
manufacture.
    The Rule currently requires that imitation political items be 
marked with the date of manufacture. One comment recommended broadening 
the Rule to require that all political items, both original and 
imitation, be permanently and prominently marked with the year that the 
manufacturing process was completed.\34\ According to the comment, 
requiring that the date of manufacture appear on all political items 
would prevent the consumer confusion and deception that occurs with 
certain types of political buttons. According to this comment, 
manufacturers routinely print excess ``button papers'' so that if they 
receive additional orders during the campaign they will not need to 
print additional papers. These excess papers may not be manufactured 
into finished political buttons, however, until years later. For 
example, the comment described a situation in which paper sheets of 
images created and printed in 1920 for the 1920 Cox-Roosevelt campaign 
were not put on buttons until 1997.
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    \34\ APIC, 515, 4.
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    The Commission does not propose to expand the Rule to require the 
marking of original political items. First, the Commission does not 
have the authority to require such marking under the Act, which 
requires the marking of only imitation items. Second, the problem 
raised by the comment is already covered by the Act and Rule. The Act 
and Rule define ``Original political item'' as including ``any 
political button * * * produced for use in any political cause.'' \35\ 
Until button paper is incorporated into a political button, a political 
button cannot have been ``produced'' for use in any political cause. A 
subsequently produced political button therefore would not be an 
``original political item'' as defined in the Act and Rule. The type of 
button described by the comment would thus be an imitation political 
item that, under the current Rule, must be marked with the year of 
manufacture.
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    \35\ 15 U.S.C. 2106; and 16 CFR 304.1.
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    c. Replace minimum size requirements for required markings with a 
performanced-based standard.
    The Rule currently mandates the font style and minimum size for the 
markings required by the Rule \36\ but allows the minimum marking size 
for imitation numismatic items to be proportional to the size of the 
item.\37\ The FRN asked whether the Commission should amend the Rule to 
replace the mandated minimum sizes with a performance-based standard, 
for example, with a clear and prominent disclosure requirement.\38\
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    \36\ See 16 CFR 304.5(3) and (4) (imitation political items) and 
304.6(3) and (4) (imitation numismatic items).
    \37\ For example, the minimum total horizontal dimension of the 
word ``copy'' should be six millimeters or ``not less than one-half 
of the diameter of the reproduction.'' 16 CFR 304.6(3).
    \38\ 62 FR 14049.
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    Five commenters involved in the numismatic field addressed this 
issue. Three of those five favored keeping the existing size standards 
because they believe that the precise requirements of the current 
standard provide clear guidance as to what is lawful. According to 
these comments, a performance standard would introduce uncertainty that 
could cause delay, additional costs, or lead to litigation.\39\ Two 
comments appeared to favor a performance-based standard, although both 
comments also noted the benefits of mandated size requirements.

[[Page 36558]]

Although one comment noted that in general mandated disclaimers are 
often so small as to render them worthless,\40\ this comment also 
stated that the current Rule, with its mandated size standard, has 
materially lessened the amount of counterfeit political items in the 
marketplace.\41\ This comment voiced support for modification of the 
current standard to a performance-based standard coupled with a 
``though not smaller than'' requirement, with the caveat that ``the 
result must be at least as effective as the status quo.'' \42\ Another 
comment supported adoption of a performance-based standard, 
specifically a clear and prominent standard, while at the same time 
expressing concern that ``there is too much room for individual 
translation'' without specific size requirements.\43\
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    \39\ ANA, 94, 3; Coin World, 514, 3; and, Ganz, 1, 1.
    \40\ APIC, 515, 10.
    \41\ Id. at 2.
    \42\ Id. at 10.
    \43\ Gallery Mint, 398, 5.
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    The Commission has determined to keep the present minimum size 
standard. As noted previously, the comments indicated generally that 
the current standard is working well and does not impose significant 
costs on small entities or others. Second, several comments indicated 
that the certainty provided by the current standard allows them to plan 
and anticipate costs, and that a performance-based standard would 
eliminate these benefits and could cause confusion. Finally, the 
current standard already addresses a concern of those suggesting that 
the Commission consider a performance-based standard by allowing a 
minimum size for the word ``copy'' that is proportional to the size of 
the imitation numismatic item.

B. Comments Relating to Expanding Coverage of the Act and Rule to 
Antiques and Collectibles in General

    As previously noted, the scope of the Act and Rule is limited to 
imitation political and numismatic items. This section discusses the 
numerous comments that related to products not presently covered by the 
Act and Rule.\44\ In essence, these comments state that reproductions 
of many types of antiques and collectibles are being passed off as 
originals, causing economic harm to collectors and dealers. Because of 
improvements in technology, the comments alleged, even knowledgeable 
persons have difficulty differentiating the reproductions from the 
originals. The comments suggested two amendments to the Rules to 
address these problems. First, some comments proposed that the coverage 
of the Act and Rule be expanded to all reproductions of antiques and 
collectibles. Second, many comments also recommended that the 
Commission require permanent country-of-origin labeling for all 
reproductions of antiques and collectibles.
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    \44\ As described above, the Commission received over 1,000 
letters advocating that the Act or Rule be expanded to cover all 
antiques and collectibles. E.g., Sprowls, 276, 1; Bucher, 244, 1; 
Anderson, 58, 2; and Whitehouse, 20, 1. Many comments also described 
specific examples of individual instances involving the passing off 
of a reproduction as an original.
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    After carefully considering these proposals, the Commission has 
determined not to amend the Rule as suggested. First, as discussed 
above, the Hobby Protection Act applies only to imitation political and 
numismatic items. The Act does not provide the commission with 
authority to expand the Rule beyond the Congressionally mandated scope 
of the Act to cover all reproductions. The Commission also notes that 
existing laws and other resources address many of the problems 
discussed in the comments. In particular, country-of-origin marking for 
imports is under the jurisdiction of the U.S. Customs Service. Because 
many comments indicated that foreign-made reproductions pose the 
greatest problems, the Commission has brought the issues raised in this 
proceeding to the attention of the Customs Service, which has authority 
to take action where goods fail to bear a required country-of-origin 
marking.
1. The Scope and Source of the Passing-Off Problem
    The comments suggested that there are many categories of 
collectibles subject to being passed off,\45\ and that the volume of 
reproductions being offered for sale as originals may be large.\46\ The 
comments provided several explanations for the passing-off problems. 
First, the comments uniformly stated that the quality of reproductions 
has greatly improved to the point that reproductions can be virtually 
indistinguishable from the originals.\47\ Several comments noted that 
even experts may not be able to distinguish originals from 
reproductions.\48\
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    \45\ As one comment stated, ``Fake and Repros exist in almost 
every sector of the collecting hobby.'' Donaldson, 11,1. The 
comments cite the passing off of the following products, among 
others: Nippon porcelain (Puckett, 45 1 and 223 form letter 
comments); Cambridge glassware (Upton, 505, 1); Griswold cast iron 
cookware (Smith, 498, 1); Coca Cola memorabilia and postcards 
(Wildman, 40, 1; Rutledge, 43, 1); antique quilts, transferware, 
majolica, and ironstone (Nickel, 18, 1); Tiffany lamps (Curry, 575, 
1); calendars, calendar plates, almanacs and calendar art (Moses, 
74, 1); Parrish and Nutting prints, powder horns and scrimshaw, 
Shaker items, Sterling Victorian match safes and lockets, Brilliant 
period cut glass patterns, Galle art glass, and perfume and scent 
bottles (Donaldson, 11, 1); and confederate veteran reunion badges 
and medals (Finlayson, 240, 1).
    \46\ See, e.g., Berndt, 52, 1; and LaBatt, 366, 1. These 
comments state that the commenter has visited many venues that 
allegedly sell reproductions as originals.
    \47\ See, e.g., Chervenka, 497, 2; ``Now, antique reproduction 
importers are manufacturing goods that are virtually identical 
copies of old originals including factory names, artist signatures 
and trademarks. Many of these new pieces * * * are cast in molds 
taken directly from old originals. This means new pieces do not just 
loosely resemble the original, they are an exact clone of the 
original.''
    \48\ Thoe, 540, 2; and Skeim, 225, 1.
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    The comments appeared to agree that the quality of reproductions 
has improved, but were not in agreement regarding how these 
reproductions come to be passed off as originals. According to one 
commenter, the problem is not with reproductions being made for 
decorative purposes and sold in retail stores, where it is likely that 
purchasers are aware that they are buying reproductions. The problem 
begins when a reproduction subsequently enters the secondary market and 
may be passed off as an original.\49\ Other commenters, however, argued 
that reproductions are intentionally sold as originals.\50\
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    \49\ Billings, 22, 1.
    \50\ See, e.g., Tucker, 495, 1, who states that reproductions 
are made overseas, shipped to the United States with country-of-
origin labels attached which then are removed somewhere in the 
distribution system and sold as originals. According to the 
commenter ``[t]his is fraud and * * * [t]he manufacturers of these 
items are well aware of what happens.'' Another commenter claims 
that, ``[m]ost of these items [reproductions] are expressly made to 
fool the general public as to authenticity.'' Porta, 572, 1.
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    The comments indicated that reproductions are made both overseas 
and domestically.\51\ Although the comments do not present quantitative 
data that establishes the number of foreign-made reproductions being 
sold as originals in the United States, the majority of the commenters 
indicated that they believe the problems lie chiefly in overseas 
production.\52\
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    \51\ One comment noted that both domestic and overseas companies 
have mastered techniques for making pottery, wood, metals, and glass 
appear to be hundreds of years old. Thoe, 540, 1.
    \52\ See, e.g., Tucker, 495, 1. The comments state that a 
variety of countries are the sources of reproductions. For example, 
one comment states that Brazil, France, Italy, and several Far East 
countries export all types of reproductions of antiques and 
collectibles while the Philippines manufactures ``antique'' oak 
furniture which is imported into the United States and sold as 
authentic antiques. Sprowls, 276, 1. Another comment alleges that 
Galle glassware reproductions are ``being mass produced'' in 
Romania, China, and Japan while Roseville pottery is being produced 
in China. Chervenka, 497, 2.
    Several comments also cite the domestic production of replicas 
that are passed off as originals. See, e.g., Finlayson, 240, 1.

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[[Page 36559]]

    The comments present numerous anecdotes regarding the harm caused 
by passing off. Although these anecdotes do not present information 
sufficient to quantify or determine the amount of economic and other 
harm caused, the following is a summary of the adverse effects noted in 
the comments: That the individual buyer pays considerably more than the 
product is worth;\53\ that owners of original antiques or collectibles 
which are heavily reproduced lose the value of their investment;\54\ 
that the uncertainty regarding the genuineness of antiques and 
collectibles dissuade persons from purchasing originals or from 
becoming collectors, which also adversely affects businesses that deal 
in originals.\55\
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    \53\ See, e.g., Chervenka, 497, 2, describing circumstances in 
which buyers mistook new Galle glassware for old and paid $10,000 
for a reproduction which cost about $500 wholesale and paid $3,500 
for a different reproduction which cost $450 wholesale. Another 
example mentioned was a buyer allegedly spending ``tens of 
thousands'' of dollars for a Tiffany lamp at ``one of the better 
known auction houses that employed in-house experts'' only to find 
out later that it was not genuine and worth less. Craig, 575, 1.
    \54\ Due to the glut of reproductions, ``[m]any older people who 
wish to sell their antiques and collectible are not getting the full 
value'' (Dillinger, 103, 1) while some collections ``will never 
recover their value because of the flood of * * * reproductions.'' 
Nickel, 18, 1.
    \55\ The comments allege that uncertainties of investment value 
caused by reproductions ``scare off novices who might otherwise 
collect these items [original antiques and collectibles]'' 
(Billings, 22, 1) and make collectors not buy ``for fear of 
reproductions.'' Skeim, 225, 1. Dealers have commented that 
customers' fear of buying reproductions have adversely affected 
their business. Vierling, 532, 1; and Craven, 508, 1.
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2. Proposals To Expand Coverage of the Rule to Non-Covered Products
    Many comments propose that the coverage of the Act be expanded to 
all antiques and collectibles.\56\ A number of comments suggest, as an 
alternative to expanding the coverage of the Act or in addition to such 
expansion, that both foreign and domestic reproductions be marked 
permanently with the country-of-origin. The comments generally 
suggested that foreign reproductions with country-of-origin labels that 
are non-permanent are the primary source of the passing-off 
problem.\57\ For several reasons, however, the Commission does not 
propose to adopt the remedies suggested by the comments.
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    \56\ The 721 comments generated from the Antique Week form 
comment stated that the Act should be expanded to all antiques and 
collectibles and that the Commission recommend such expansion to 
Congress. E.g., Lubitz, 61, 1. The 223 comments using or based on 
the Nippon Collector's Club form letter as well as the 34 comments 
using or based upon the Antiques Journal form letter urged the 
extension of the regulatory powers of the Act to require permanent, 
non-removable marking for collectibles other than those currently 
covered. E.g., Dersheimer, 59, 1; and Mercier, 4, 1. Additionally, 
numerous non-form comments suggested the expansion of coverage of 
the Act to other antiques and collectibles. E.g., Gregory, 5, 1; 
Ritchie, 9, 1; Nickel, 18, 1; SeGall, 26, 1; Castle, 295, 1; James, 
381, 1; Reid, 415, 1; Fendelman, 494, 1; and Curry, 575, 1. 
Presumably, these comments intend that all antiques and collectibles 
would be marked with the word ``copy'' or the date of manufacture.
    \57\ See, e.g., Brady, 47, 1. See also Reynolds, 169, 1; Barrie, 
19, 2; Cotton, 21, 1; Berndt, 52, 1; and Carner, 213, 1.
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    First, the Act does not provide the Commission with legal authority 
to expand the coverage of the Act to all antiques and collectibles. The 
plain language of the Act encompasses only numismatic and political 
items and directs the Commission to promulgate rules regarding the 
marking of only these covered products. For this reason, the Commission 
cannot amend the Rule to include products not itemized in the Act to 
require the marking of items not covered by the Act.
    Second, the Commission believes that existing federal and state 
laws adequately address the key issues raised in the comments. For 
example, the majority of comments cited imported reproduction as the 
most significant source of passed-off goods. Well-established laws and 
regulations already in existence address country-of-origin markings for 
goods imported into the United States. Specifically, country-of-origin 
marking for imports is under the jurisdiction of the U.S. Customs 
Service, which enforces the Tariff Act.\58\ Under the Tariff Act, every 
article of foreign origin must be legible, indelibly, and permanently 
marked in a conspicuous place to indicate the country of origin. The 
Act also allows the container of an imported good to bear the origin 
marking rather than the good itself, as long as the good reaches the 
ultimate purchaser in the container. Under the Tariff Act, then, a 
permanent marking is a marking that will remain on the article or 
container until it reaches the ultimate purchaser, although the marking 
may be removed by the ultimate purchaser and need not be of a 
permanence to remain affixed once in his or her possession. This 
marking may not be removed prior to delivery to the ultimate purchaser, 
however, and anyone who removes this marking prior to such delivery 
could be subject to prosecution and criminal penalties.
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    \58\ 19 U.S.C. 1304. The Tariff Act of 1930, as amended, and 
implementing regulations (19 CFR 134) are available at Customs 
Website: ``www.customs.ustreas.gov''.
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    Commission staff has brought the concerns regarding foreign origin 
marking raised in this proceeding to the attention of the Customs 
Service because Customs regulations have an impact on several of the 
problems discussed in the comments. For example, several comments 
indicated their belief that country-of-origin labels are deliberately 
removed.\59\ The Customs Service urges persons with information 
regarding the violative removal of required country-of-origin markings 
to write to: Office of Field Operations, ATTN: Commercial Enforcement 
Branch, U.S. Customs Service, 1300 Pennsylvania Ave., NW, Washington, 
DC 20229 or to call Customs' toll free Commercial Fraud Hotline, 1-800-
ITS-FAKE.
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    \59\ See note 50 supra.
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    In addition to the deliberate removal of country-of-origin labels, 
many comments suggested that the lack of truly permanent country-of-
origin labels on reproductions results in these reproductions being 
passed off as originals in the secondary market.
    The Commission declines to prohibit the legal removal or loss of 
country-of-origin labels and does not have authority under the Act to 
require the origin marking of domestic reproductions. Other legal 
remedies are available, however. For example, passing off can be 
prosecuted as criminal fraud \60\ or as civil fraud in a lawsuit by the 
buyer.\61\ Additionally, if the passing off involves illegal trademark 
infringement, it may be actionable in a private lawsuit under the 
Lanham Act.\62\ Further, a pattern or practice of significant 
affirmative misrepresentations or failures to disclose material 
information relating to reproductions passed off as originals may 
violate Section 5 of the Federal Trade Commission Act.\63\
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    \60\ E.g., Castle, 295, Attachment 1 (describing a criminal law 
enforcement inquiry regarding reproduction ``acid cutback'' lamps 
and vases and bronze statues being sold as antiques).
    \61\ Section 2-721 of the Uniform Commercial Code provides civil 
remedies for material misrepresentation and fraud in sales 
transactions;
    \62\ 15 U.S.C. 1125. See also Goshe, 528, 1 (describing 
collector's club successful law suit against manufacturer of 
reproductions that had illegally obtained logo trademark).
    \63\ Section 5 of the Federal Trade Commission Act prohibits 
deceptive acts or practices in commerce. 15 U.S.C. 45. A deceptive 
act or practice is one that is likely to mislead consumers acting 
reasonably under the circumstances. See Cliffdale Associates, Inc., 
103 F.T.C. 110 (1984). As a matter of policy, however, the 
Commission does not generally intervene in individual disputes. 
Generally, the instances of passing off described in the comments 
reflect specific individual transactions, rather than a pattern or 
practice of passing off. Where the Commission obtains evidence of 
such a pattern or practice, however, it can take action. For 
example, the Commission recently sued a company that had 
telemarketed purportedly rare ``error'' postage stamps to consumers 
as valuable, safe, and liquid investments, at highly inflated 
prices. FTC v. Equifin International, Inc., Financial Frontiers, and 
F. Jerold Hildreth, No. CV-97-4526-DT (CWx) (C.D. Cal. Dec. 11, 
1997).

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[[Page 36560]]

    In addition to legal remedies, the record indicates that there are 
non-legal resources available to educate consumers about antiques and 
collectibles and thus reduce consumers' susceptibility to the practice 
of passing off. For example, several newsletters and hobby newspapers 
regularly warn and advise buyers of antiques and collectibles about 
reproductions of specific items and classes of items \64\ Many comments 
also indicate that there are collector clubs for many categories of 
collectibles that provide members with similar information. Commission 
staff will explore whether there is a role for the Commission in these 
efforts to increase consumer awareness.
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    \64\ See Chervenka, 497, 3 (publisher of Antique & Collectors 
Reproduction News) and Antique Week, 499, attachments.
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IV. Conclusion

    The comments uniformly favor retention of the Rule and state that 
there is a continuing need for the Rule with regard to currently 
covered products, i.e., imitation numismatic and political items; that 
the Rule provides benefits to consumers and industry; that the Rule 
does not impose substantial economic burdens; and that the benefits of 
the Rule outweigh the minimal costs it imposes. Although the comments 
addressing the impact of the Rule on small entities were minimal, these 
comments, including comments from major national associations in the 
numismatic and political items trade, indicate that the Rule does not 
place significant burdens on small entities. Accordingly, the 
Commission certifies that the Rule has not had a significant impact on 
a substantial number of small entities.
    Although many comments recommended that the Act and Rule be 
expanded to cover all antiques and collectibles, the Commission does 
not have the authority under the Act to expand the Rule in this manner. 
In addition, there are a variety of legal and non-legal resources that 
address many of the issues raised by the commenters favoring expansion 
of the Act's coverage. Accordingly, the Commission has determined to 
retain the current Rule and is terminating this review.

List of Subjects in 16 CFR Part 304

    Hobbies, Labeling, Trade practices.

    Authority: The Federal Trade Commission Act, 15 U.S.C. 41-58 and 
the Regulatory Flexibility Act, 5 U.S.C. 601.

    By direction of the Commission.
Benjamin I. Berman,
Acting Secretary.
[FR Doc. 98-17929 Filed 7-6-98; 8:45 am]
BILLING CODE 6750-01-M